Should online shops honour pricing mistakes?

If an online retailer mistakenly discounts a sofa or TV by hundreds of pounds, should the shop honour the discount for customers who took up the offer? It seems not all companies will honour pricing mistakes.

It hasn’t been a good few weeks for retailers. I’m not talking about the downturn in sales or news of another big high street name (Peacocks) going into liquidation – although this is all pretty pessimistic stuff.

I’m talking about the recent spate of pricing mistakes on big-value items – and the bad PR that followed.

First, Next mistakenly advertised a pair of sofas worth £1,198 on its website for just £98. The pricing error remained uncorrected for nearly six hours and customers said that they had £98, plus delivery charges, debited from their bank accounts.

Then, Marks & Spencer advertised a Panasonic 50-inch 3D plasma TV, worth £1,099, for just £199. Again, savvy shoppers were quick to snap them up, and some reported the money coming out of their account.

So how should retailers deal with this situation? The ensuing events show just how differently pricing mistakes can be resolved.

Stand by your orders

Next point-blank refused to honour the ‘deals’, pointing to the small print in its terms and conditions which, it says, allows it to cancel orders before they are dispatched for delivery. This is how a Next spokesperson justified the decision:

‘This was a genuine and unfortunate error, which we corrected as quickly as possible. We then discussed with our local Trading Standards office how to deal with any orders that had been placed at the wrong price.

‘We are contacting all customers involved, explaining that unfortunately we will not be able to fulfil their order.’

But it was power to the people over in the M&S camp. After trying to resolve the problem by offering the bargain-hunters off a £25 ‘goodwill gesture’, the customers set up an online petition called ‘Marks & Spencer supply our TV’s that we paid for’. Hardly the catchiest (or most grammatically correct) campaign in the world, but it worked – M&S backtracked and stood by the orders.

So, it was happy days if you wanted a new TV, but not so good if you wanted a new sofa to watch it from.

Your rights with pricing disputes

But should M&S have backed down – or was Next at fault for not honouring its mistake? I spoke to our senior solicitor, Joanne Lezemore, to get her view on where customers stand legally:

‘Generally, if you enter into a contract for goods which a company fails or refuses to deliver, then a breach of contract occurs and you can look to the company for damages (being the cost of having to buy the goods elsewhere). But where it is clear that a mistake has been made, the law will not allow one person to benefit as a result.’

So if the goods were advertised cheaper than usual, you may be able to hold the company to a contract. However, where it is clear there is a mistake (would you really expect that plasma TV to be under 200 quid?), the consumer cannot then take advantage of that mistake. So what does Joanne think of these cases?

‘My own view is that, where the mistake is not clear, the company should be bound to honour the contract. But consumers also have to be aware that if something seems too good to be true, it probably is, and a company shouldn’t to be bound by what are clearly typing errors. I think the law has the right balance in these situations.’

Do you agree with Joanne or do you think those M&S customers were right to kick up a fuss? What would you do in the same situation?

I don’t think it’s fair to expect a business to honour a ‘deal’ which has obviously been put up in error. Fair enough expecting them to honour it where the difference is £20, but when it’s a couple of hundred – forget it. The fact the M&S people set up a petition is ridiculous.

That said, there’s no harm in placing the order and hoping they fulfil it.

There is a danger that an incorrect price could be used deliberately as a publicity stunt, but I feel sorry for M&S having to deal with greedy people who are not prepared to accept that the company has made an obvious error.

Perhaps online traders should offer customers a small amount of compensation (e.g. £10) to disappointed customers. Any company that regularly makes mistakes should be answerable to Trading Standards.

When the retailer advertises at a price in a store, and takes the money from you then surely a contract has been created and agreed. It cannot charge you more than the labelled price, nor do they have to sell to you at that price if the cashier notices a mistake.

Surely with online systems their order processing systems is playing the role of cashier, and if it’s taken the funds from your account, then they are liable for supplying at that price.

The retailer can easily create systems and processes that delay confirmation / acceptance of the order and alert if the selling price is below the cost price, or a larger than predicted number of sales has taken place, so in these cases both retailers should man-up, accept the losses, then b***h-slap the business analysts (not the developers) that defined the requirements for their online trading systems.

I also agree that companies should be very careful about how their online processes give effect to a contract, but the situation in law should not be confused with face-to-face selling, where a contract normally becomes binding at point of sale.

The Distance Selling regulations gives the consumer additional rights to cancel a contract, and the supplier a limited get out if the goods ordered are “not available”.

“A contract which has not been performed [by the retailer] within the period for performance shall be treated as if it had not been made, save for any rights or remedies which the consumer has under it [i.e. the contract] as a result of the non-performance.”

The retailer could argue that the goods are not available from the supplier (certainly not at the price advertised), thus the consumer’s rights in this situation are only as set out by the original contract of sale. Because, in law, a contract has not been made, there is no contract to breach, unless the retailer also fails to honour the “rights or remedies” set out in the original agreement.

‘Generally, if you enter into a contract for goods which a company fails or refuses to deliver, then a breach of contract occurs and you can look to the company for damages (being the cost of having to buy the goods elsewhere). But where it is clear that a mistake has been made, the law will not allow one person to benefit as a result.’

I would qualify above statement by use of word ADDITIONAL as to ‘the cost of having to buy the goods elsewhere’… say widget costs £100 in shop A that you’ve contracted to buy but in breach of contract it fails to make available for purchase and in mitigation you purchase identical widget at alternative outlet B that costs say £135; recoverable damages is the difference in price: £35, not £135.

Long settled principle in English law prices the subject of a display is only an invitation to treat not a legally-binding offer capable of acceptance that if it were so together with tender of specified valuable consideration (money) would have have created a contract enforceable in law.

Hope this clarifies things somewhat and not least as to the ‘mistake’ bit that was alluded to and it certainly not being a case of one ‘benefitting’ alluded to as well.

This is my understanding of English contract law as prevailing today…. it’s all about recovering expectation losses et al and damages to reflect the losses As IF the contract had not been breached or the obligations contained therein had been carried out.

The problem comes when it’s not customers buying in good faith, expecting a bargain, the problem comes when it’s members of sites like Hotukdeals (and others) speculatively buying a dozen items each to resell on ebay. If you glance at one of these sites, you’ll see the deals marked up as probable mis-prices but it doesn’t deter the ebayers, because in the end if it doesn’t pan out, all they’ve lost is some time.

It’s a shame some behave like this because it reduces the chances of a store honouring a mis-price to genuine consumers.

Speak of detrimental loss and reliance being placed and trader will cough up, in gift vouchers that I merely suggested you understand…. value thereof MORE than the value of item I was disappointed of (I paid nothing)…. local Trading Standards useless as doing nothing.

Concentrates minds wonderfully if you mention blog orTwitter as to your disappointment.

What detrimental loss? You find an item at a price that is obviously wrong, try to place an order it but they cancel the order as long as they refund you, what loss have you incurred? People wonder why prices are going up, only have to look at that attitude tbh

A detriment has been caused in my case by trader A being guilty of a false trade description in the stuff it offered to sell when I turned up to collect but rejected, as not complying with advertised specs thus DENYING me opportunity to buy at that price, my being kept waiting for 6 weeks when I cd have bought similar stuff elsewhere at B in mitigation AND by which time B no longer stock that item. A lot of inconvenience caused and time wasted too.

It’s an act of indulgence on part of M&S, for the sake of good customer relations and the securing of goodwill: the whole advantage whatever it may be, of its reputation and connection, one definition I came across long ago.

Like I said, those disappointed do not have a valid or sustainable claim in law. Organising a petition is disgraceful and showing unmitigated pure greed.

Some online retailers have clauses in their Terms and Conditons that state that companies have a right to cancel the order in the event of a mistake and that an order is merely an offer to buy, stating that a contract is not created until the goods are despatched.

In this case I don’t think the company should have honoured the orders. Though it was good to see, the company taking responsibility for it’s actions/mistakes. If it was by a couple of pound, then yes I believe the order should have been honoured, because the shops at times can be quick in short-changing customers when it comes to cash sales.